Resolving insurance coverage and claim disputes
Independent insurance agents can help their clients with the claims process and possibly get initially denied claims covered.
The general public assumption is that once an insurance company has denied a claim the issue is dead, but independent agents can, with help, be extremely influential in getting initially denied claims covered. There are two important dispute resolution doctrines: First, the purpose of insurance is to insure. Second, the best way to resolve claim disputes is to prevent them.
The purpose of insurance is to insure
Numerous courts have opined that the purpose of insurance is to insure. People don’t buy insurance not to have coverage, though when purchasing directly on the basis of “fast, easy and cheap,” that’s all too often the result.
The quest for coverage in an insurance policy usually begins with an insuring agreement. Most insuring agreements are incredibly broad to meet the exposure needs of a great variety of insureds. For example, a typical general liability or homeowners’ liability insuring agreement covers any bodily injury or property damage for which an insured is alleged to be legally liable if that liability arises out of an occurrence that takes place during the policy period and within the coverage territory.
That’s extraordinarily broad coverage. If someone is injured or their property is damaged by an insured, it’s covered. Until, of course, further exploration of the policy reveals that maybe it’s not covered. In the meantime, though, it’s presumed to be insured and a defense is owed until there has been a settlement, a declaratory or summary judgment, or final adjudication.
As a result, courts generally interpret insuring agreements broadly (and exclusionary provisions restrictively) in favor of insureds. Perhaps more important, though, the implication is that, when a loss occurs, the insurer should look for coverage and not an exclusionary loophole that will provide the ability to avoid coverage. In 1983, the Travelers Insurance Company claims manual, under “Analysis of Liability Coverage,” supported the premise that “[There is a] requirement to meet the duty of good faith to the insured. The most positive way to do that is to look for coverage in our policies, and not to look for ways to deny coverage.”
This is the institutional view taken by most adjusters and the culture fostered by most insurers. Unquestionably there are exceptions for which it is important to remain vigilant, but for the most part, insurers must always try to do the right thing.
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Resolve claims disputes by preventing them
For the purposes of discussion, suppose that a commercial insured’s property exposures are covered under an ISO CP 00 10 Building and Personal Property Coverage Form. During the policy period, a covered peril damages the portable docks along the insured’s waterfront location. The adjuster initially denies the claim, citing a Property Not Covered provision for waterfront property, including “docks.” The agent then attempts to get the claim paid by arguing that the policy language refers to real, not personal, property. And, the docks, being portable, are business personal property, not real property. Complicated situation and semantics, right?
This may or may not be a valid argument, but the best way to have avoided this dispute was to have addressed the issue at policy inception. The ISO CP 14 10 Additional Property Coverage endorsement can be used to cover property otherwise excluded in the Property Not Covered section of the CP 00 10 form. This is an often-overlooked endorsement that can resolve the building vs. business personal property issue by effectively defining certain fixtures and structures to be building property, from asphalt parking lots to underground piping.
Another potential coverage dispute can arise when employees rent autos on business trips. If coverage for non-owned autos is provided by ISO business auto symbols 8 and 9, which symbol applies to rental of autos by employees? This distinction is important because only symbol 8, not symbol 9, extends physical damage coverage to rental cars.
The solution to this potential dispute is to use ISO endorsement CA 20 54 Employee Hired Auto which effectively declares such rentals to be symbol 8 coverage and clarifies that the business auto policy provides primary coverage over any other policy, including the employee’s personal auto policy. Perhaps agents should add this endorsement to every business auto policy automatically?
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Consumer beware
In a highly regulated, complex industry, it seems only prudent to be wary of InsurTech startups that rely on consumers who directly purchase insurance without the counsel of an agent or other insurance professional. A good insurance agent assists consumers and business owners in analyzing exposures to loss, matching proper insurance coverage with identified exposures, and advocating on behalf of insureds at the time of loss.
Although the value of such claim advocacy cannot be understated, perhaps the greatest value proposition the agent brings to the table is the ability to minimize the likelihood that coverage disputes will arise.
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Bill Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of “When Words Collide: Resolving Insurance Coverage and Claims Disputes,” published by Insurance Nerds and available at www.insnerds.com/when-words-collide.